WASHINGTON — An Iraqi exile group may have violated restrictions against using taxpayer funds to lobby when it campaigned for U.S. action to oust Saddam Hussein, according to documents and U.S. officials with direct knowledge of the matter.

If the charge—which is the subject of an upcoming probe by Congress' General Accounting Office—is borne out, it means that U.S. taxpayers paid to have themselves persuaded that it was necessary to invade Iraq.

Officials of the Iraqi National Congress, which played a central role in building support for last year's invasion of Iraq, deny that the group crossed the line prohibiting lobbying, or that it broke any other rules.

But officials at the State Department, which managed the INC's U.S. government grant, said they believe it did, despite what a senior official said were repeated warnings to the group to avoid lobbying "or even the appearance of same."

The officials spoke on condition of anonymity because the government's dealings with the INC, a favorite of some Pentagon officials and advisers, remain highly controversial. State Department officials, along with many intelligence officers, have been longtime critics of the group and want to minimize the group's role in post-Saddam Iraq.

Federal law prohibits the use of U.S. government funds for lobbying on financial matters, such as government contracts. A grant agreement between the INC and the State Department prohibited lobbying and propagandizing.

In this case, individuals who held senior positions with the INC set up a non-profit group to lobby for U.S. action in Iraq. The group, composed largely of Iraqi-Americans, relied on private funds and wasn't subject to the same lobbying restrictions.

Even so, the formation of the group surprised and angered U.S. government officials, some of whom suspected it was an attempt to sidestep the lobbying restrictions.

The incorporation papers of the spin-off group, the Iraq Liberation Action Committee, say it was founded "to work in support of United States and international efforts to remove the regime headed by Saddam Hussein from power in Iraq" and to help in "drafting resolutions, legislation and regulations" to advance democracy there.

The group's principal founder was Francis Brooke, the INC's Washington representative, according to the corporate documents obtained by Knight Ridder.

Brooke, in a telephone interview, acknowledged a "professional relationship" with the lobby group. But he said there was "no crossover between that and anything else."

In a March 3 letter, the senators asked the GAO to determine whether taxpayer funds were used to arrange meetings between Iraqi defectors and journalists, to influence Congress regarding funding or legislation, or to propagandize the American public. Their request was first reported by Newsweek magazine.

Kerry, who voted in favor of an October 2002 resolution to authorize the Iraq war, and Levin, who voted against, cited a State Department funding agreement with the INC.

"The functions of the INC office and personnel in the U.S. will strictly exclude any business associated with, or that could appear to be associated with, attempting to influence the policies of the United States Government or Congress, or propagandizing the American people," that agreement said.

A GAO official said the agency would look into the matter to see if a full-scale review is warranted.

The role of outside groups and advisers in the decision to invade Iraq and in postwar planning has come under growing scrutiny since it was revealed that much of the intelligence on Saddam's weapons programs and terrorist ties that President Bush relied on was inaccurate or fabricated. Some crucial pieces of intelligence found to be bogus were supplied by Iraqi defectors made available by the INC and other groups.

The INC, an umbrella group for anti-Saddam Iraqi exiles, received at least $18 million in U.S. funds between 1998 and 2003, according to a January report by the Congressional Research Service.

Its leader, Ahmad Chalabi, is a member of the Iraqi Governing Council in Baghdad and has been pushed by some Pentagon and White House officials as the next leader of Iraq.

On numerous occasions, the INC made Iraqi defectors available for interviews to U.S. and foreign news organizations.

The INC boasted, in a June 2002 memo to the Senate Appropriations Committee, that it helped get the defectors and their allegations into more than 100 stories in the U.S. and international news media. As Knight Ridder reported March 15, the defectors' information, which has since proved faulty in many cases, was gathered and disseminated under a U.S. government-funded effort called the Information Collection Program.

Questions about the INC's compliance with lobbying laws also were raised in a 2001 audit by the State Department's inspector general, which cited the relationship between the group and the Iraq Liberation Action Committee, which it refers to as ILAC.

The publicly released version of the audit is partially redacted. But it implies that a person or persons who worked for the INC also had a relationship with ILAC, "contrary to the proposal and assurances made" to State Department officials.

"The ILAC is a non-profit organization that receives funding (from private citizens) that supports the operational costs of lobbying activities in Washington, D.C.," the audit states.

"We could not ascertain whether any violations of the general restrictions on lobbying occurred, because INCSF (the INC Support Foundation) lacked a transparent agreement that documented the responsibilities or terms and conditions associated with the duties performed or services provided by this person," it said.

The INC Support Foundation was founded in August 1999 by the London-based INC to handle State Department funding.

The auditors questioned more than $17,000 in salaries and health insurance for an analyst in the INC's Washington office, who they said was paid nearly double the budgeted amount and wasn't an Iraqi, contrary to the group's budget proposal.

Overall, the document questioned $2.2 million in INC spending. A later audit said that many of the problems had been rectified.

INC official Brooke, citing the audit, said, "We believe these charges have been looked into in detail" and found to be without merit.

ILAC was incorporated in Washington in January 2000 as a 501(c)(4) non-profit organization, which permitted it to lobby. The INC Support Foundation was founded as a 501(c)(3) organization, which are largely barred from lobbying, but, according to the State Department audit, later changed its designation to 501(c)(4) as well.

According to news reports at the time, members of the now-defunct ILAC issued press releases, met with members of the Bush and Gore 2000 presidential campaigns and traveled to Kuwait to press their case for removing Saddam.

Mahdi al Bassam, who was ILAC's chairman and is a nephew of Chalabi, said the group was formed to push for implementation of the 1998 Iraq Liberation Act, which called for regime change in Iraq and authorized $97 million in U.S. military equipment and services to designated Iraqi opposition groups.

"We lobbied, we talked with different people at different levels," said al Bassam, a Texas cardiologist. Asked why the group faded away, he said: "The law became implemented, I guess."

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